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Macquarie Infrastructure Company suspends dividend

The New York Stock Exchange-listed Macquarie satellite will use cash accumulated from the dividend suspension to accelerate reduction of its $1.8bn debt burden. It may also seek bankruptcy protection for its heavily indebted airport parking business, which has seen revenues erode due to slower airline traffic.

Macquarie Infrastructure Company (MIC), Macquarie Group’s New York Stock Exchange-listed infrastructure investment firm, is suspending its dividend in order to accelerate reduction of its $1.8 billion debt burden.

In November the firm reduced its third quarter dividend to $.20 per share, versus $65 per share in the second quarter, to preserve cash.

Many listed infrastructure funds have faced similar pressures to deleverage in the wake of the global credit crisis as falling revenues and plummeting valuations have made it more difficult for them to refinance or sell assets.

Recently, Sydney Stock Exchange-listed Macquarie Airports (MAp) sold stakes in Copenhagen and Brussels Airports and committed to put more equity into Sydney Airport, while Macquarie Infrastructure Group (MIG) agreed to sell 50 percent of its interest in the Westlink toll road and will look at selling other assets as well to pay down debt.

MIC will use cash accumulated as a result of the divided suspension to reduce $887.5 million of debt related to its airport services business or to reduce the drawn balance on its $69 million revolving credit facility. Additionally, 100 percent of cash generated by airport services will be used to pay down debt until the business’ debt-to-EBITDA ratio falls below 6.0x.

In total, MIC has nearly $1.8 billion of debt outstanding.

The firm also indicated that it may seek to restructure or seek bankruptcy protection for its airport parking business: a portfolio of 31 off-airport parking facilities which has seen its revenues plummet in the wake of slowing airport traffic.

Analysts at Wachovia estimate that the $200 million of debt tied to the airport parking business is about $100 million more than what the business is currently worth. That debt matures in September.
MIC had previously tried to sell the airport parking business but was unsuccessful, according to people familiar with the matter.

Since its initial public offering in 2004, MIC has been investing in infrastructure assets throughout the United States. The largest part of its portfolio is comprised of airport services, or fixed-base operations that provide airport refueling and related services. Other businesses include bulk liquid storage, energy, gas production and distribution, and airport parking.

The firm reported revenue of $1.05 billion for 2008, or a 27 percent increase over 2007 revenues, mostly due to the acquisition of 32 additional facilities in its airport services portfolio. Consolidated profit also rose 13 percent to $398.5 million over 2007 levels due to contributions from the acquired facilities.

MIC shares finished the week down 56.2 percent, closing on $1.3 per share. The shares have tumbled 65 percent year to date.